climate strategy of Raiffeisen Capital Management by Raiffeisen Capital Management

climatestrategy

Contents

1. Mission Statement

2. Climate change as a challenge

A. Global warming

B. Climate risks and opportunities

C. Emissions categories

D. Restrictions

3. Climate neutrality in portfolio management

A. Climate-neutral objectives and underlying assets

B. Net Zero Asset Managers Initiative (NZAM)

C. Calculation of carbon footprint

D. Sustainability approach in investment decisions

I. Principles

II. Consideration of the principal adverse impacts on sustainability factors

III. The sustainable investment process - the Green Path 13

Document created by: Raiffeisen KapitalanlageGesellschaft m.b.H. Mooslackengasse 12, 1190 Vienna As of March 2023 Raiffeisen Capital Management stands for Raiffeisen Kapitalanlage GmbH, or short Raiffeisen KAG.

E. Shareholder engagement policy

F. Reporting

4. Operational ecology

5. Organisation

6. Collaborations, initiatives, certifications, awards

A. Voluntary commitments

B. Additional memberships and initiatives

C. Other cooperations

Climate Strategy of Raiffeisen KAG 1. Mission statement

Raiffeisen KAG is committed to comprehensive, effective, and holistic sustainability. We create lasting value for the future – through our passion and dedication for meaningful value creation capital, customer relationships built upon respect and value, and an appreciative company culture. With commitment and care, we strive to achieve the preservation and balanced development of financial, social, and natural capital.

As the asset manager of the RBI Group1,

- in all areas of the investment process,

Raiffeisen KAG understands sustainability to

- in the ongoing development for our

mean responsible corporate action for long-

enterprise.

term business success, in harmony with envi-

Global climate change has far-reaching con-

ronmental and social objectives. Our objective

sequences for the environment, the economy,

is to be an asset manager with a clear focus

and society. Raiffeisen KAG understands its

on sustainability. With regard to our core

responsibility to make a suitable contribution

business, asset management, this involves

to fighting the climate crisis and to actively

the consistent application of ESG criteria.

support the necessary transformation as a

We integrate the topic of sustainability at all

financial market participant. The key goals

levels:

for this path are formulated in the climate

- in the further development of products,

2. Climate change as a challenge

strategy.

A. Global warming One of the dominant topics of our day and

example, the sea level reached a new record-

age is climate change, a global challenge that

setting high in 2021, and extreme weather

knows no national borders. The worldwide

events such as heatwaves, storms, floods, and

increase in temperature has been constantly

droughts are becoming increasingly frequent3.

accelerating in recent decades, with the period

Above and beyond this, the changing weather

between 2015 and 2021 containing the seven

conditions have serious consequences for

warmest years ever recorded. This has far-rea-

society and the economy that are already being

ching consequences for our environment. For

seen today and will extend far into the future.

1 RBI stands for Raiffeisen Bank International AG 2 ESG stands for Environment (E), Social (S) and Governance (G). 3 Cf. World Meteorological Organization, State of the Global Climate 2021 (WMO-No. 1290) https://library.wmo.int/doc_num.php?explnum_id=11178

climatestrategy 2023 |

In order to mitigate or partially reverse – at least

quires significant investments, which cannot

over the long-term – the serious consequenc-

be undertaken by public entities alone. Involv-

es of climate change, it is necessary to limit

ing the private sector is absolutely necessary,

global temperature rise to a maximum of

with the financial market playing a special role

1.5 °C compared to the pre-industrial level, as

in this regard. On the one hand, this involves

stipulated in the Paris Climate Agreement. Im-

the rechannelling of private capital flows into

mediate action at many different levels is nec-

sustainable investments, and on the other

essary for this goal to be achieved, to result in a

hand, the financial market functions as a vehi-

radical global reduction in emissions of green-

cle for enhancing the transparency, long-term

house gases, which is possible by way of a va-

consideration and integration of sustainability

riety of technological measures and behaviour-

risks in risk management. Regulatory changes

al changes. Because greenhouse gas emis-

accelerate this development, such as the EU

sions, which are also caused by humans, are

action plan on financing sustainable growth or

one of the main factors behind global warming.

the European Green Deal, which sets climate

The atmospheric concentration of greenhouse

neutrality by 2050 as its goal. Conscious of

gases (GHG) such as carbon dioxide, methane,

its active role as a financial market participant

and nitrous oxide has now reached peak levels.

and its related responsibility, Raiffeisen KAG

In recent decades, greenhouse gas emissions

decided to put sustainability at the core of

have risen strongly (annual increase of 1.3% in

its corporate strategy several years ago. The

the period 2010–2020), reaching levels higher

commitment to climate neutrality is of great im-

than ever before in human history. Achieving

portance in this regard.

climate neutrality by 2050 is a precondition

In light of this responsibility, Raiffeisen KAG

for limiting global warming to 1.5 °C, and some

has formulated a climate commitment, which

countries have now made this their goal.

expresses our company’s voluntary under-

The necessary transition to a sustainable, car-

taking to make an appropriate contribution to

bon-neutral economy and infrastructure re-

combatting the climate crisis:

4 Cf. The Paris Agreement https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement 5 C f. IPCC Sixth Assessment Report: Climate Change 2022 https://www.ipcc.ch/report/ar6/wg2/downloads/report/ IPCC_AR6_WGII_FullReport.pdf 6 Climate neutrality means, on the one hand, measuring activities that are harmful to the climate (via greenhouse gas balances) and, on the other hand, neutralising such activities, whether directly by avoiding and reducing greenhouse gas emissions or indirectly by financing climate protection projects as compensation for emissions volumes that cannot be further reduced or avoided. Cf. BOKU Competence Center for Climate Change https://xn--klimaneutralitt-elb.boku.ac.at/was-ist-klimaneutralitat/

Raiffeisen Capital Management

Table 1: Climate commitment

Limit global warming

The constant increase in average global temperatures represents a serious risk to the environment, society, and the economy. Consequently, at Raiffeisen KAG we are determined to make a contribution to limiting global warming and have formulated goals in this regard (see Section 3.A).

Mitigating climate change

As an asset manager, we play an active role in mitigating the consequences of climate change through our products and services. We are constantly developing our range of products and include options with environmental objectives. At the same time, we offer high transparency with the annual publication of the carbon footprint of our range of sustainable products.

Lowering greenhouse gas emissions

We actively promote the reduction of greenhouse gas emissions by way of dedicated products which facilitate the energy transition with their investment focus.

B. Climate risks and opportunities Climate risks refer to risks, whose root cause

technological developments, social trans-

is related to climate change or which are exac-

formation, or disruptions in supply chains.

erbated by climate change. Companies and

A distinction is made between two categories:

financial market participants can be affected

physical risks and transition risks, which are

directly or indirectly by climate risks, whether

presented in the table below.

this occurs by way of regulatory changes,

Table 2: Physical risks and transition risks

CLIMATE RISK

CAUSE

Physical

CLIMATE CHANGE: - Extreme weather events (floods, heatwaves, drought, etc.) - G radual changes in climate (e.g. temperature increase, rising sea levels)

Transition

TRANSITION TO A CLIMATE-NEUTRAL ECONOMY AND SOCIETY: - Political or legal changes (e.g. climate protection policy, emissions trading) - Technological developments (e.g. renewable energies) - Changes in consumer and investment behaviour

Source: FMA - Austrian Financial Market Authority

Climate risks have direct and indirect effects on

value. While physical climate risks tend to have

companies and financial market participants

a medium- to long-term effect, transition risks

and are ultimately reflected in a decline in asset

can materialise over the short term.7

7 Cf. FMA Guide for Managing Sustainability Risks (2020)

climatestrategy 2023 |

At the same time, climate change and the

innovation can be fostered, and new fields of

related impacts on the real economy and so-

business can be accessed.8 The identification

ciety offer opportunities to profit from the new

of these opportunities and risks for the com-

possibilities that are opening up and to actively

panies affected is an integral part of Raiffeisen

support economic transition. For example,

KAG’s sustainable investment process (see

new demand patterns may arise for certain

Section 3.F).

(e.g. low-emissions) products or services,

C. Emissions categories While CO 2 emissions are often referred to

words the amount of heat trapped by a certain

colloquially in simplified terms, a wide range

mass of a greenhouse gas compared to the

of greenhouse gases are actually included in

amount of heat trapped by the corresponding

the calculations. These consist of the green-

mass of CO2. For example, the CO2 equivalent

house gases specified in the Kyoto Protocol.

for methane amounts to 21, which means that

The following figure shows these gases with

one kilogram of methane traps 21 times more

their relevant global warming potential, or CO2

heat than one kilogram of CO2 within the first

equivalent. This is a relative measure of a gas’s

100 years after being emitted.

contribution to the greenhouse effect, in other

Table 3 Greenhouse gases according to the Kyoto Protocol

GREENHOUSE GAS

GLOBAL WARMING POTENTIAL

Carbon Dioxide (CO2 )

Methane (CH4 )

Nitrous Oxide (N2O)

310

Hydrofluorcarbons (HFC)

150–11,700

Perfluorcarbons (PFC)

6,500–9,200

Sulphur hexafluoride (SF6 )

23,900

Source: Carbon Footprint Report 2022

Greenhouse gas emissions are assigned to

the generation of purchased energy. Scope

three categories according to the Greenhouse

3 covers the emissions that occur in the up-

Gas Protocol: Scope 1, 2, and 3. Scope 1 per-

stream and downstream value chain. To facili-

tains to all of a company’s direct emissions.

tate understanding, an illustration of the three

Scope 2 emissions are indirect emissions from

categories is presented on the next page.9

8 Cf. German Environment Agency: Management of Climate Risks at Companies (05/2021) 9 C f. Carbon Footprint Report (2022) https://issuu.com/raiffeisencapitalmanagement/docs/rcm_carbonfootprint?fr=sZGMyMjgzNTc5MQ

Raiffeisen Capital Management

Figure 1

CO2

Emissions categories

rush-hour traffic of employees goods and services purchased means of product/assets business trips

CH4

N2O

district heating and cooling steam emissions from the generation of purchased electricity

PFC

NF3

SF6

stationary equipment

franchise operations

mobil assets

investments

volatile gases

use of products sold further processing of sold intermediate products lessors

lessees

transport and distribution (downstream)

waste generated in the company

disposal of products sold

transport and distribution (upstream) upstream energyrelated emissions

HFC

Scope 1

Scope 2

energy obtained

Scope 3

upstream value chain

Scope 3

ownstream value chain

Source: carbonfootprint report 2022 of Raiffeisen KAG10

The dataset is very well developed for Scope

pany. Nevertheless, the analysis of all three

1 and Scope 2. Scope 3 emissions are more

of these scopes of emission is essential for

difficult to capture, as parts of the activities

obtaining a comprehensive view of a corporate

along the value chain do not fall within the

emissions footprint.

scope of influence or knowledge of the com-

D. Restrictions Climate risks are difficult to measure and

ity information can be presented for equities

model, in part due to their long-term con-

and corporate bonds, while the data situation

sequences. Current data availability has

for government bonds is more difficult. Invest-

limitations and does not yet allow for a com-

ments in infrastructure and real estate have very

prehensive view of the climate-relevant impacts

complex effects and can only be assessed in

of our actions (e.g. as noted above, limited

a rudimentary fashion, if even at all. However,

Scope 3 data from corporate sources, insuf-

calculation methods are constantly being

ficient coverage of all emissions categories).

refined and thus it is conceivable that data

Models and scenario analyses involve uncer-

quality will improve over time and that the

tainty and are subject to regular or needs-

scope of the investment categories that is cov-

based updates (e.g. when new data become

ered will be expanded. In the event of important

available). The currently typical methodologies

changes to the conditions described above, we

for assessing and calculating greenhouse gas

will adapt our climate strategy in accordance

emissions often do not yet cover all invest-

with the underlying goals and supporting

ment categories. For instance, suitable qual-

models in a timely manner.

10 Source: carbonfootprint report 2022 of Raiffeisen KAG

climatestrategy 2023 |

3. Climate neutrality in portfolio management Figure 2 Schedule for net zero

A. Climate-neutral objectives and underlying assets Following the first-time definition of cli-

2025, 2030, and finally until 2050.

mate goals in 2017, we presented a new cli-

The assets (known as “assets in scope”) inclu-

mate strategy in 2022, after several years

ded in the climate strategy cover all equities

of development. This new strategy contains

holdings and corporate bonds in the retail

reduction goals over three time periods: until

funds managed by Raiffeisen KAG. The year

2015 - Launch of Raiffeisen-GreenBonds - Austrian eco-label awarded for the first time - Signing of Montréal Carbon Pledge 2020 - Launch of Raiffeisen SmartEnergy ESG Equities - Coal exit path decided 2016 - FNG seal awarded for the first time

2021 - Widespread conversion of traditional equity funds into sustainable funds

2017 - Signing of RNI climate strategy - Reduction of investments in coal decided

Basis climate target*:

2022 - Start of the conversion of bond funds and mixed funds into sustainable funds

122.97

15 16 17 20 20 20

19 20

2025 - Reduction of CO2 emission intensity by 25% - Engagement dialogue with the 20 largest GHG emitters within the portfolio

climate strategy published

tCO2/invested mn. euro

20 21 22 20 20 20

2030 - Reduction in GHG emissions in customer investments by at least 25% (vs. 2015) - Share of climate-friendly products & services at least 25%

-25%

-50%

Net zero 100% of AuM

25 20

30 20

50 20

* investment portfolio: equities and corporate bonds of own-managed mutual funds

2019 was taken as the base year11 for calcu-

50% by 2030 (base year: 2019) for a portfolio

lations. By including all holdings of equities

consisting of corporate bonds and equities.

and corporate bonds, we are starting off on

The scope covered by the intermediate targets

the path towards net zero with 21%12 of our

(2025, 2030) includes Scope 1 and Scope 2

assets under management (AuM). The port-

CO 2 emissions. Due to the current limitati-

folio targets formulated within the framework

ons in data availability and quality, Scope 3

of the climate strategy are as follows:

figures will be reported, but do not constitute

- Raiffeisen KAG undertakes to transition

part of the current agreement on targets. The

the investment portfolio to net zero GHG

commitment to achieve climate neutrality by

emissions by 2050, which corresponds to

2050 has a broader approach in terms of the

a maximum global temperature increase

coverage of greenhouse gases. The inclusion

of 1.5 °C by 2050;

of all emissions categories cannot currently be

- reduction of emissions intensity by at least

presented due to inadequate data availability.

25% by 2025 (base year: 2019) for a portfolio

Calculations are conducted on the basis of the

consisting of corporate bonds and equities;

emissions database of ISS ESG.

- reduction of emissions intensity by at least

11 Base year emissions 12 Base year portfolio: 2020 (corresponds to base year emissions 2019)

Raiffeisen Capital Management

Target pathway for the reduction of emissions at the portfolio level

tCO2/Invested EUR million (Scope 1+2)

Figure 3

-25% -50%

Net Zero 2019

2025

2030

2050

The shareholder engagement target

bonisation strategy or for the allocation of

embedded in the climate strategy includes

investments in renewable energy), which are

the shareholder engagement dialogue with

communicated to the company, and quantified

the 20 largest GHG emitters in the portfolio,

in terms of their achievement. The individual

which have either not yet formulated an obli-

success of these shareholder engagement

gation in relation to the Paris climate targets

efforts is incorporated into the suffix of the

or belong to the 20 largest GHG emitters in

Raiffeisen ESG Indicator.

the portfolio. In the shareholder engagement

Using quantified targets, the climate strategy

process, the goal is to influence companies

is currently focused on the level of portfolio

to either make a commitment to the Paris cli-

management. Consequently, the milestones

mate targets, to comply with these targets

and measures of our climate strategy are pri-

(and the related intermediate targets), or to

marily oriented towards reducing or avoiding

significantly reduce their GHG emissions. In

the emissions of the AuM that are covered.

this regard, specific objectives are defined

Instruments for GHG compensation are not a

for each company (e.g. for a general decar-

strategic component of the climate strategy.

B. Net Zero Asset Managers Initiative (NZAM) The Net Zero Asset Managers Initiative is an

company’s current climate strategy and, in

international group of asset managers com-

addition to achieving net zero GHG emissions

mitted to supporting the goal of net zero

in 2050 for 100% of the AuM, they also include

emissions by 2050. In accordance with the

the formulation of intermediate targets and the

Paris climate targets, this is intended to limit

regular review of such intermediate targets and

global warming to 1.5 °C and allow for a fair

the assets in scope at intervals of five years as

transition.

well as the integration of climate goals into the

Raiffeisen KAG joined the initiative in Decem-

shareholder engagement policy. Publication of

ber 2022. The transparency obligations result-

an annual climate report pursuant to the TCFD13

ing from its membership are reflected in the

recommendations is also required.

13 TCFD: Task Force on Climate-Related Financial Disclosures

climatestrategy 2023 |

C. Calculation of carbon footprint By signing the Montréal Carbon Pledge in

at the portfolio level);

2015, we undertook to measure the carbon

- CO2 emissions normalised per USD million

footprint of our ESG funds. Scope 1 and Scope

invested, for the purposes of comparison

2 emissions are used in the calculations, as

with the market and other portfolios;

the dataset is already very well developed for

- carbon intensity (in tonnes of CO2e per

these emissions. We are working to also take

USD million of corporate revenue);

Scope 3 emissions into account at the sector

- average weighted carbon intensity (in ton-

level. The emissions data from the ISS ESG

nes CO2e / USD million invested, in rela-

database are used for calculating the carbon

tion to the portfolio weighting of an issuer).

footprint.

More information can be found in our publi-

The following data are calculated:

cation “Carbon Footprint 2022” on our home-

- total CO2 emissions (in tonnes of CO2e,

page.14

D. Sustainability approach in investment decisions The sustainability approach described below is the standard approach for funds managed by Raiffeisen KAG which are part of the ESG range of products.

I. Principles Sustainability is implemented in the invest-

also integrates environmental and social fac-

ment process by integrating ESG considera-

tors as well as (good) corporate governance.

tions throughout the process. In addition to

This occurs at various levels.

economic factors, the investment process

NEGATIVE CRITERIA

Figure 4 The motives of the sustainable investment process

absolute

AVOIDANCE

screening

and show responsibility

INFLUENCE

and have impact through dialogue and engagement

relative

value-based norm-based

SUPPORT and empower sustainability

ENGAGEMENT voting corporate dialogue individual

collaboration platforms

14 carbonfootprint report 2022 of Raiffeisen KAG

Raiffeisen Capital Management

BEST IN CLASS thematic investing impact investment

Practising avoidance and showing responsibility: negative criteria Avoiding controversial business areas and

of coal leads to relatively high CO2 emissions.

practices is based on the ethical premise of

It also generates emissions of other pollutants

avoiding participation in bad things and is

including sulphur dioxide, nitrogen oxides, and

a fundamental principle of our sustainable

fine particulates. The environmental damage

investment policy. The main instrument is the

caused by the surface mining of lignite coal

exclusion of companies and countries (regional

can only be repaired through extensive land

entities) whose areas of business violate cer-

rehabilitation efforts. Raiffeisen KAG is striving

tain pre-defined criteria. In the investment

to systematically exit the financing of the coal

process, this occurs using the negative criteria

industry by 2030. This extends to all investa-

that we have defined. Negative criteria imple-

ble companies which are active in the fields of

mented at the company-wide level address the

coal extraction, processing, combustion (for

topics of coal, controversial weapons, food

the generation of electrical or thermal energy),

speculation, and companies or issuers with

transport, and other infrastructure. Details on

reputational risk. For ESG funds, additional

exclusions and revenue thresholds in relation

criteria are defined, which must be met.

to fossil greenhouse gases can be found on

In relation to climate change, the exclusion of

our website at www.rcm.at in our Coal Policy.15

coal deserves special mention. The combustion

Providing support and promoting sustainability: best in class The next significant level of development can

as issuers of debt securities. The thorough

be described as “collaborating for good” and

integration of ESG research into the invest-

focuses more on integrating ESG research into

ment process (ESG indicators) leads to higher

enterprise analysis and thus into the selection

ESG quality and improves the risk profile of

of securities. This approach is also applied

the portfolio.

accordingly for countries (regional entities)

Sustainable Development Goals The Sustainable Development Goals (SDGs)

The SDGs form an important foundation for

were developed at the UN Climate Conference

engaging with companies and issuers from a

in Rio in 2012 and have been in force since

sustainability perspective.

2016. The SDGs were unanimously accepted

In our investment process, evaluating the con-

by 193 countries and are also being imple-

tribution that companies and issuers make

mented by the Austrian federal government.

to the SDGs is an important aspect when

The 17 goals with a total of 169 targets run

assessing sustainability impacts. Companies

until 2030 and cover a broad range of sus-

and issuers are analysed to determine their

tainability objectives, from fighting poverty

SDG-related effects before and during an

and gender equality to ensuring sustained,

investment.

inclusive, and sustainable economic growth.

15 www.rcm.at/sustainability

climatestrategy 2023 |

Exercising influence and having an impact: shareholder engagement The third level of a holistic sustainability con-

should not violate these. The vision of the

cept is shareholder engagement as an inte-

desired “double dividend” can only really be

gral component of a responsible, sustainable

pursued in a credible manner through share-

investment policy. It complements the first two

holder engagement.

levels described above by supporting change

The interaction of all three elements – avoid,

in the sense of having a socio-economic

support, and especially influence – forms the

impact by way of influencing the behaviour of

basis for the responsible, active management

companies, organisations, and consumers.

of ESG funds. These elements ensure the con-

The focus is on corporate dialogue and, in

sideration of sustainability risks and adverse

particular, on exercising voting rights. These

impacts on sustainability factors, as well as the

impacts can fall outside the immediate sphere

positive effect of investments in the selection

of return or risk targets for a portfolio, but they

of companies and issuers.

II. C onsideration of the principal adverse impacts on sustainability factors

Sustainability factors refer to issues such as

adverse impacts on sustainability factors, and

environmental, social, and employee matters,

vice-versa.

respect for human rights, and anti-corruption

The consideration of the principal adverse

and anti-bribery measures.

sustainability impacts is based among other

Adverse impacts on sustainability factors (also

things on the UN SDGs, the UN Global Com-

known as principal adverse impacts or PAIs)

pact, the OECD guidelines for corporate gov-

describe the impact of the investment on the

ernance and multinational enterprises, the

external world, while sustainability risks from

Universal Declaration of Human Rights, and

the external world have a (potentially) ne-

other international conventions and stand-

gative impact on the value of the investment.

ards. Furthermore, the implementation of the

The difference between adverse impacts on

PAIs reflects requirements which are related

sustainability factors and sustainability risks

to most of the climate-critical sectors and are

is not precise; accordingly, measures to limit

oriented to the goals of the Paris Agreement

sustainability risks generally also reduce

on climate protection.

Raiffeisen Capital Management

The following table shows an excerpt of the PAIs that are implemented, which is particularly significant in the context of the climate strategy.

Table 4 Example: PAI indicators for greenhouse gas emissions

Indicators for companies, in which we invest

Climate indicators and other environment-related indicators

Greenhouse gas emissions

PAI 1

GHG emissions

PAI 2

Carbon footprint

PAI 3

GHG emissions intensity for companies, in which we invest

PAI 4

Share of investment in companies active in the field of fossil fuels

PAI 5

Share of energy consumption and energy generation from nonrenewable sources

PAI 6

Intensity of energy consumption by climate-intensive sectors

Raiffeisen KAG is committed to a comprehen-

cess of mutual funds, which are managed

sive consideration of the most adverse effects

according to sustainable aspects. Details on

on sustainability factors in the investment pro-

this in the following.

A detailed presentation of our policy on the consideration of principal adverse impacts on sustainability factors at the product level can be found on our website rcm-international.com under “Our Topics/Sustainability/Policies & Reports“.

III. The sustainable investment process - the Green Path Raiffeisen KAG’s sustainable investment pro-

ment process, in the course of which tradi-

cess is based on the end-to-end integration of

tional financial analysis is combined with ESG

economic, environmental, and social aspects.

analysis.

This occurs at numerous levels in the invest-

Selection of corporate securities Raiffeisen KAG has identified key topics at

ment, in addition to return and risk targets.

the investment level: these so-called “Zuku-

Sustainability is thus active management.

nfts-Themen” (future topics) are ascribed

The starting point of Raiffeisen KAG’s inte-

great importance in the internal research and

grated approach is analysis on the basis of

are also incorporated into Raiffeisen KAG’s

internal and external data and information.

investment process. At present, these topics

Internal know-how is based on the proprietary

specifically include the fields of energy, infra-

research results from the “Zukunfts-Themen“,

structure, commodities, technology, health

and Raiffeisen KAG’s sectoral investment

care/nutrition/well-being, the circular eco-

assessments are part of the analysis right from

nomy, and mobility.

the very beginning. Additionally, positive and

The integration of ESG aspects into Raiffeisen

negative criteria are taken into consideration.

KAG’s fund management in the framework of

In terms of the underlying external research

the Green Path is intended to strengthen the

that is employed, data from two sustainability

consideration of socially responsible invest-

research agencies form an important founda-

climatestrategy 2023 |

tion. On the basis of the internal and external

ance sheet fraud). Moral aspects also form the

ESG data, an in-house Raiffeisen ESG Corpo-

basis for some criteria, such as gambling or

rate Indicator is calculated, which represents

pornography.

one of the core decision-making criteria in

In terms of the financial aspects, there is no

the investment process for ESG funds. On the

investment in companies or issuers with inad-

whole, the Raiffeisen ESG Corporate Indicator

equate financial strength.

is based on three pillars: in addition to the sec-

The assessment of shareholder engagement

tor assessment and the corporate ESG score,

forms the third pillar. This contains a combi-

the topic of shareholder engagement forms the

nation of three dimensions:

third pillar of the indicator.

1. the intensity and form of shareholder

The first pillar of the Raiffeisen ESG Corpo-

engagement;

rate Indicator is based on the analysis of the

2. the communication – this includes an

“Zukunfts-Themen-Teams“. They calculate

assessment of the company’s willingness

scores for sectors and subsectors, which

to address Raiffeisen KAG’s questions, the

reflect their potential from a sustainability

frequency of communication, and prompt,

perspective and thus provide a sector assess-

timely responses to these questions;

ment. A five-level rating scale is used.

3. the impacts of shareholder engage-

Calculation of the corporate ESG score comes

ment – this quantifies the implementation

next as the second pillar of the investment

of shareholder engagement goals by the

process. It includes various ratings from exter-

company.

nal partners, which incorporate stakeholder

Consideration of the principal adverse

assessment, an analysis of ESG risks, a cor-

impacts (PAIs) is incorporated into the

porate governance analysis, an evaluation of

three pillars of the investment process

controversial issues, and an analysis of the con-

described above. This occurs through the

tribution to the Sustainable Development Goals,

use of negative criteria, through the inte-

as well as the assessment based on negative

gration of ESG research into the invest-

criteria defined by the management company.

ment process, and in the asset selection

At this analysis level there is a pre-selection

(positive criteria). The use of positive

process for the overall investment universe. In

criteria includes the absolute and rela-

consideration of sustainability, no company or

tive assessment of companies regarding

issuer in this universe may violate the negative

stakeholder-related data, e.g. relating to

criteria established by Raiffeisen KAG. The

employees, society, suppliers, business

negative criteria are subject to constant moni-

ethics, and the environment. In addition,

toring and may be amended or adjusted on the

the instrument of shareholder engagement

basis of new information or developments in

is used with companies in the form of cor-

the market. The objective of the strict criteria

porate dialogue and especially the exercise

is to avoid controversial business areas and

of voting rights so as to reduce adverse

criminal acts, which may result in significant

sustainability impacts.

damages to the environment and society, and

Furthermore, the PAIs are calculated at

possibly for the companies as well. Negative

the level of the investment universe on a

criteria may be motivated by environmental

monthly basis and analysed quarterly. In

considerations (such as the production of oil

the course of this, the PAIs are analysed

and gas, coal extraction, and power genera-

in an absolute, relative or binary approach

tion using coal), social aspects (such as the

and rated within the sustainable invest-

violation of labour rights or human rights), or

ment universe or respective sector. Values

governance issues (such as corruption or bal-

that exceed or fall below defined thresholds

Raiffeisen Capital Management

are reviewed in a detailed analysis.

eration the comprehensive Raiffeisen ESG

Good corporate governance, in particular

Indicator, its trend (ESG momentum), and

solid management structures, relations

fundamental aspects.

with employees, and compensation, is a

The Raiffeisen ESG Indicator is used as the

prerequisite for the selection of companies.

sustainability indicator in the investment

In the three pillars described above, good

process. It combines the sum of the assess-

corporate governance is assessed in the

ments of the issuer of the security (com-

investment process based on the applica-

panies and sovereigns) at the fund level.

tion of negative criteria, the integration of

It is measured on a scale from 0 to 100.

ESG research into the investment process

The assessment also takes into account

(ESG scores) for the evaluation of compa-

the relevant sector. As the indicator plays a

nies, and ultimately in the asset selection,

central role in Raiffeisen KAG’s investment

as well as through continuous monitoring

process, it is also used as a sustainability

of the governance-related score of the fund

indicator for measuring the extent to which

in the internal limit system. Governance-re-

the environmental or social characteristics

lated topics are also particularly relevant in

promoted by the fund or its sustainable

the process for issuers of securities which

investment objective are achieved. Report-

are exposed to reputational risks.

ing occurs annually in the annex “Envi-

Based on the above analyses and prin-

ronmental and/or Social Characteristics”

ciples, at the end of the Green Path a

or in the section “Sustainable Investment

broadly diversified portfolio is ultimately

Objective” of the relevant annual report, and

constructed from the selected companies

in the regular publication SUSTAINAIBLE

and issuers or funds, taking into consid-

INVESTMENT for selected funds.

Figure 5 Sustainable investment process - the Green Path

climatestrategy 2023 |

Continous monitoring of the sustainability universe The investment universe is updated monthly

UN Global Compact17, the core conventions

and constantly amended with internal input

of the International Labour Organization18, and

sources. Furthermore, the investable sus-

the UN Guiding Principles on Business and

tainability universe is monitored daily using

Human Rights19.

a so-called Impact Monitor by MSCI ESG16,

The topic areas analysed cover the Environ-

with a transparent methodology based on

ment, Customers & Stakeholders, Human

more than 2,500 data sources. The process

Rights, Labour Rights & Supply Chain, and

employed analyses violations of international

Corporate Governance. Current controversies

conventions and other serious controversies,

are included in the assessment: depending on

evaluates company policy, and the manage-

the degree of a violation, a company may be

ment of controversies. The goal is to avoid rep-

immediately excluded from the investable sus-

utational risks. The standards applied are the

tainability universe or put on a watch list.

Selection of government bonds The Raiffeisen ESG Sovereign Indicator was

external research providers are also used as

developed for the assessment of sovereign

input in the calculations.

issuers. For the calculation, various topics

The process of asset selection in the case of

were identified that reflect how sustainably

government bonds includes the considera-

countries conduct themselves in terms of

tion of the principal adverse impacts (PAIs).

both their laws and their actions towards the

This occurs through the use of negative cri-

environment and their citizens. These topics

teria, through the integration of ESG research

are represented in the calculation model by

into the investment process, and in the asset

so-called factors, with each factor assigned

selection (positive criteria). The use of posi-

to one of the categories Environment, Social,

tive criteria includes the absolute and relative

or Governance and to one of the sub-catego-

assessment of sovereigns regarding sustaina-

ries biodiversity, climate protection, resources,

ble development, represented by factors such

environmental protection, basic needs, jus-

as the political system, human rights, social

tice, human capital, satisfaction, institutions,

structures, environmental resources, and cli-

politics, finances or transparency. Data from

mate change policy.

16 MSCI ESG is an external research partner of Raiffeisen KAG 17 T he United Nations Global Compact is a voluntary initiative, in which companies make a commitment to the United Nations in relation to shared sustainability goals. These goals range from human rights and labour rights, environment objectives, to fighting corruption. 18 T he International Labour Organization is a specialised organisation of the United Nations, which promotes the improvement of labour conditions and living standards by establishing international standards 19 T he United Nations Guiding Principles on Business and Human Rights are guidelines for states and companies, which help to prevent human rights violations.

Raiffeisen Capital Management

Selection of funds On the one hand, for the selection of invest-

asset manager dialogue is deemed to be very

ment funds from other management com-

important, in order to be able to perceive the

panies, quantitative data such as ESG

partner’s sustainability developments. Par-

assessments and information on controversies

ticular emphasis is placed on avoiding food

are incorporated into an internal sustainability

speculation and that the negative criteria for

indicator, to enable the ranking and analysis of

investments in coal and controversial weap-

the sustainable investment universe. On the

ons have been defined. Despite regular and

other hand, there is also a qualitative selec-

thorough review, compliance with the negative

tion process, which includes face-to-face

or positive criteria promised by other manage-

discussions with the managers. The regular

ment companies cannot be guaranteed.

Use of derivatives The use of derivatives plays a subordinated

the sustainability-related objectives are not

role in the sustainable investment process.

impaired by the use of derivatives. In the case

Derivatives are mainly used for the manage-

of derivatives that are used to hedge risks, the

ment of market risks and to implement effi-

promoted environmental or social characteris-

cient portfolio management. Care is taken that

tics are not taken into consideration.

E. Engagement policy We view active engagement as a fiduciary

ing current events in a targeted manner via

responsibility to our customers. Our enga

responsive dialogue allows for an accurate

gement process consists of active dialogue

assessment of the company in the context of

with companies and issuers on the one

its business environment and potential risks.

hand, and the exercise of voting rights on

Dialogue with companies also forms the third

the other. These are exercised individually

pillar of the Raiffeisen ESG Indicator and is

or collectively via collaborations. Not only

thus anchored at the core of the sustainable

do we obtain direct information on the

investment process.

fin ancial situation and development of a

The exercise of shareholders’ voting rights

compan y via direct contacts, we also it

occurs either directly or indirectly via proxy.

see as our job to help convince companies

Raiffeisen KAG acts according to internal

of the value of improved corporate social

principles which are based on a transparent,

responsibility (CSR).

sustainable corporate governance policy and

In terms of corporate dialogue, we distin-

cover significant topics that regularly arise at

guish between proactive engagement and

annual general meetings.

responsive engagement. Proactive, con-

The integration of climate goals at the

structive dialogue with companies serves

level of the engagement policy is crucial,

to identify potential financial and non-finan-

not only to focus attention on historical

cial opportunities and risks, and address-

emissions data, but also to send a signal

climatestrategy 2023 |

for the future and suppor t broad-based

clear engagement goals which are based

transformation at companies. In accordance

on achieving net zero in 2050, as listed in

with this, in our climate goals we have set

Section 3.A.

The engagement policy, including the voting rights policy, and the annual shareholder engagement report20 can be found on our website www.rcm.at or www.rcm-international.com under About us / Corporate Governance.

F. Reporting We will report regularly on our strategies,

targets in relation to AuM, which are managed

activities, and progress in relation to the cli-

in accordance with the net zero strategy.

mate-neutral development of our portfolio and

The intermediate targets are reviewed at least

other areas falling within our scope of influ-

once every five years, in conjunction with

ence. Joining the NZAM Initiative requires us

determining share of AuM on the net zero

publish an annual report in accordance with

path. The share of assets in scope will con-

the TCFD recommendations (Task Force on

stantly rise and, in addition to equities and

Climate-Related Financial Disclosures), which

corporate bonds, will also cover other asset

pertain to the areas “Governance”, “Strat-

classes in our portfolio, insofar as suitable,

egy”, “Risk Management”, and “Metrics and

mature methodologies for capturing emis-

Targets”. Additionally, we report annually on

sions data have developed.

the development pathway to our intermediate

20 https://issuu.com/raiffeisencapitalmanagement/docs/engagementbericht 21 Starting with the 2023 reporting period.

Raiffeisen Capital Management

4. Operational ecology

Table 5 Carbon footprint of Raiffeisen Capital Management 22

Raiffeisen KAG’s commitment to environ-

marks the year that cooperation started with

ment and climate protection is also reflected

the University of Natural Resources and Life

in our company’s internal operations. As a

Sciences (BOKU) for the compensation of

part of the RBI banking group, we support

operational CO 2 emissions. The Raiffeisen

the group’s sustainability goals in relation to

Capital Management footprint comprises the

operational emissions. These include a 65%

business premises in Vienna with a headcount

reduction of CO 2 emissions by 2050 for the

of around 255 people. The operational CO 2

RBI Group as a whole, with 2011 established

emissions were divided into three categories:

as the base year for RBI.

energy consumption (offices, data centre),

2018 is the base year for Raiffeisen KAG for

transportation (total fleet, business-related

the development and measurement of the

air and rail travel, short-term vehicle rent-

company’s own footprint (Raiffeisen Capi-

als, employee travel to workplace) and other

tal Management’s carbon footprint). This

(waste, office paper consumption).

CARBON FOOTPRINT OF RAIFFEISEN KAG t CO2e

2019 SCOPE 1+2+3

Business trips

548.92

Energy

380.02

Business trips - commuting employees

265.94

Paper

7.9 0

Waste

6.61

Others

28.58

Total

1,237.9 6

The “Footprint Team”, which includes a

tricity consumption),

member of the executive management, was

- sustainable use of resources (e.g. paper

created in 2019. This team’s goal is to raise

consumption),

company employees’ awareness in relation to

- waste.

Raiffeisen KAG’s quantifiable carbon footprint

Examples of these efforts include the continu-

(= operational ecology) and to develop further

ous transition of advertising materials to sus-

measures in the following areas:

tainable production, revision of the company

- mobility (business travel, fleet, commut-

car policy, and focusing customer presenta-

ing, etc.),

tions on so-called green event aspects.

- e nergy (air conditioning, heating, elec-

22 T he data are gathered with appropriate care. It should be noted, however, that the analysis and expansion of the data is an ongoing process.

climatestrategy 2023 |

5. Organisation

6. Collaborations, initiatives, certifications, awards

Raiffeisen K AG’s corporate structure is

ships. Decisions on sustainability strategies,

designed in alignment with our focus on

investment processes, product design, and

sustainability and the climate. At the level of

other issues involving sustainability are made

the executive management, the Corporate

by the Sustainable Investment Committee

Sustainability Investment Officer (CSIO) is

and the Steering Committee, in cooperation

responsible for the Sustainability Office (SO)

with the CSIO.

and fund management. The SO defines the

The CSIO is also responsible for the Prod-

sustainability philosophy, manages the poli-

uct Management Department, which plays

cies and future topics, and the engagement

a central role in developing products in line

process. It is also responsible for ensuring the

with ESG considerations.

implementation of the strategies and meth-

In the course of 2021 and 2022, key aspects

ods in the investment process in the sense

were identified at the investment level: these

of sustainable product positioning. Key ele-

so-called “future topics” are ascribed great

ments include the further development of

importance in the internal analysis and are

sustainability databases, contact with the

also incorporated into the investment process.

sustainability advisory council, which con-

The topics analysed cover the areas energy,

sists of external experts who bring with them

infrastructure, commodities, technology and

the perspectives of various stakeholders, and

the circular economy, as well as health care,

the management of certifications and partner-

nutrition, and well-being.

A. Voluntary commitments Principles for Responsible Investment (PRI) The United Nations’

following (where consistent with its fiduciary

Principles for Respon-

responsibilities):

sible

Investment

1. To incorporate ESG issues into the invest-

(PRI), which were developed by a group of

ment analysis and decision-making pro-

institutional investors at the initiative of the

cesses;

UN, consist of six principles for responsible

2. To be active owners and incorporate ESG

investing. They form the core of a voluntary

issues into its ownership policies and prac-

commitment that can be undertaken by asset

tices;

managers, asset owners, and service provid-

3. To seek appropriate disclosure on ESG

ers. The goal is to support the signatories in

issues by the entities in which it invests;

integrating ESG topics into their investment

4. To promote acceptance and implementa-

decision-making processes. By doing so, the

tion of the Principles within the investment

signatories contribute to a more sustainable

industry;

global financial system. On November 21st,

5. To work together to enhance its effective-

2013, Raiffeisen KAG became one of the first

ness in implementing the Principles;

Austrian asset management companies to

6. To report on its activities and progress

sign the Principles and thus commits to the

towards implementing the Principles.

Raiffeisen Capital Management

Montréal Carbon Pledge The

Montréal

transparency about the carbon footprint of

Carbon Pledge

equity portfolios and to help to reduce this

was created in 2014 and is supported by the

footprint over the long-term. By signing the

Principles for Responsible Investment (PRI)

agreement, investors agree to measure their

and United Nations Environment Programme

portfolio’s carbon footprint annually and to

Finance Initiative (UNEP FI). The goal of the

publish the relevant data.

Montréal Carbon Pledge is to create more

Net Zero Asset Managers Initiative The Net Zero Asset

warming to 1.5 °C. NZAM was launched in

Managers Initiative

December 2020 and is part of the Glasgow

(NZAM) is an inter-

Financial Alliance for Net Zero (GFANZ) and

national group of asset managers committed

the United Nations’ campaign “Race to Zero”.

to supporting the goal of net zero emissions by

Raiffeisen KAG joined NZAM in December

2050, in line with global efforts to limit global

2022.

Raiffeisen Nachhaltigkeits-Initiative The Raiffeisen Nachhal-

form, service, and representation body for its

tigkeits-Initiative (RNI) –

members’ activities in the field of sustainabil-

previously known as the

ity. Raiffeisen KAG is a founding member.

Raiffeisen Klimaschutz-Initiative – is a plat-

B. Additional memberships and initiatives The Carbon Disclosure

tion from companies on their CO2 emissions,

Project (CDP) is a non-

climate risks, and reduction goals and strate-

profit organisation with

gies. The CDP now manages the largest data-

the goal of having companies and commu-

base of its kind in the world. Raiffeisen KAG

nities publish their environmental data, such

is a signatory investor. The data released by

as greenhouse gas emissions and water con-

the companies and the annual reports of the

sumption. On behalf of investors, once every

CDP are available at the CDP’s website free of

year the CDP uses standardised question-

charge. Investors that support the CDP also

naires to collect voluntary data and informa-

have access to non-public information.

climatestrategy 2023 |

Forum Nachhaltige Geld-

transparency, and quality of sustainable

anlagen (FNG) is a pro-

financial products;

fessional association for

– to help shape the political, legal, and eco-

sustainable financial investments in Germany,

nomic frameworks;

Austria, Liechtenstein, and Switzerland. Its

– to demonstrate the positive influence of

more than 170 member include banks, asset

sustainable investments;

management companies, insurers, rating

– to ensure quality control in sustainable

agencies, investment firms, asset managers,

investments.

financial consultants, and NGOs. Raiffeisen

FNG is constantly engaged in the further

KAG has been an active member of FNG since

development of quality standards for ESG pro-

2009.

ducts. Together with Eurosif, FNG has been

The objectives and responsibilities of FNG are:

issuing the transparency label for ESG retail

– to actively promote the development,

funds since 2008.

Forum per la Finanza Sos-

investments in Italy. Its more than 60 members

tenibile (FFS) is a multi-

include asset managers, banks, insurers, foun-

stakeholder organisation

dations, and NGOs. Raiffeisen KAG has been

with the goal of promoting socially responsible

an active member since 2016.

The Green Bond Principles (GBP) developed

intended to make access to green bonds eas-

under the auspices of the International Capital

ier for market participants, and they present

Market Association (ICMA) are a non-binding

recommendations for best practices in issu-

set of guidelines for the issuance of green

ing. The GBP were developed with the partici-

bonds. They recommend transparency in

pation of GBP members, working groups, and

reporting on the use of bond proceeds and

green bond interest representatives, taking

management, the project assessment and

into account general market developments.

selection process, and reporting. The GBP are

The principles are refined on an annual basis.

Ökofinanz-21 is a

investment: banking products, funds, equity

network of socially

investments, and insurance. Implementing

responsible con-

these important demands not only requires

sultants, which was founded in 2003. For

a complete re-think of fiduciary responsibil-

many years, this association has been calling

ities, it also requires different education and

for ethical, ecological, and social criteria to

advanced training for actors in the asset man-

be integrated as obligatory parts of the con-

agement and savings industries.

sulting process. This pertains to all forms of

C. Other cooperations Raiffeisen KAG cooperates with the Competence Center for Climate Neutrality at the University of Natural Resources and Life Sciences, for instance in the formulation of the Coal Policy.

Raiffeisen Capital Management

Raiffeisen Capital Management is a partner and member of

climatestrategy 2023 |

www.rcm.at/sustainability

Raiffeisen Capital Management is the umbrella brand for: Raiffeisen Kapitalanlage-Gesellschaft m.b.H. Raiffeisen Immobilien Kapitalanlage-Gesellschaft m.b.H Raiffeisen Salzburg Invest GmbH Mooslackengasse 12 1190 Vienna, Austria t I +43 1 711 70-0 f I +43 1 711 70-761092 e I info@rcm.at w I www.rcm-international.com